Correlation Between Ebro Foods and Edita Food

Can any of the company-specific risk be diversified away by investing in both Ebro Foods and Edita Food at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ebro Foods and Edita Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ebro Foods and Edita Food Industries, you can compare the effects of market volatilities on Ebro Foods and Edita Food and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ebro Foods with a short position of Edita Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and Edita Food.

Diversification Opportunities for Ebro Foods and Edita Food

-0.14

Correlation Coefficient

Ebro Foods  Edita Food

Good diversification

The 3 months correlation between Ebro and Edita is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries and Ebro Foods is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ebro Foods are associated (or correlated) with Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of Ebro Foods i.e., Ebro Foods and Edita Food go up and down completely randomly.

Pair Corralation between Ebro Foods and Edita Food

Assuming the 90 days trading horizon Ebro Foods is expected to generate 1.14 times less return on investment than Edita Food. But when comparing it to its historical volatility, Ebro Foods is 2.67 times less risky than Edita Food. It trades about 0.2 of its potential returns per unit of risk. Edita Food Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Edita Food Industries on December 30, 2024 and sell it today you would earn a total of  18.00  from holding Edita Food Industries or generate 9.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ebro Foods  vs.  Edita Food Industries

Ebro Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ebro Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Edita Food Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edita Food Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Edita Food may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ebro Foods and Edita Food

The main advantage of trading using opposite Ebro Foods and Edita Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebro Foods position performs unexpectedly, Edita Food can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Edita Food will offset losses from the drop in Edita Food's long position.

The idea behind Ebro Foods and Edita Food Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.